UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 36802 / February 1, 1996
ADMINISTRATIVE PROCEEDING
File No. 3-8810
______________________________
:
:
In the Matter of : ORDER MAKING FINDINGS
: AND IMPOSING REMEDIAL
RAYMOND CHARLES GROSS and : SANCTIONS
JAMES EUGENE HAMMONDS :
:
______________________________:
I.
In these proceedings instituted pursuant to Sections 15(b)
and 19(h) of the Securities Exchange Act of 1934 ("Exchange
Act"), Respondent Raymond Charles Gross ("Gross") and James
Eugene Hammonds ("Hammonds") (collectively "Respondents") have
submitted Offers of Settlement ("Offers") which the Commission
has determined to accept.1/
II.
Solely for the purpose of these proceedings and any other
proceedings brought by, or on behalf of, the Commission, or to
which the Commission is a party, prior to a hearing pursuant to
the Commission's Rules of Practice [17 C.F.R. 201.100 et
seq.],
and under the terms of the Offer, Respondents, without admitting
or denying the findings set forth below, except that Respondents
admit to the jurisdiction of the Commission over them and over
the subject matter of this proceeding and to the entry of an
Order of Permanent Injunction and Other Relief, consent to the
entry of this Order Making Findings and Imposing Sanctions
("Order").
1/ An Order Instituting Public Administrative Proceeding
Pursuant to Sections 15(b) and 19(h) of the Securities
Exchange Act of 1934 against Respondents was issued by the
Commission on September 13, 1995, Admin. Proc. File No. 3-
8810.
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III.
On the basis of this Order and Respondents' Offers, the
Commission finds that:2/
A. On November 18, 1994, an Order of Permanent Injunction
and Other Relief was entered permanently enjoining Respondents
from future violations of Sections 17(a) of the Securities Act of
1933 ("Securities Act"), Sections 10(b) and 15(c) of the Exchange
Act and Rules 10b-5 and 15c1-2 thereunder. It also required
Respondents to disgorge, together with prejudgment interest,
their gain resulting from the offer and sale of Sunrise Energy
Ltd. VII-XI Partnerships, in an amount to be determined by the
Court. Respondents were also required to pay civil penalties in
an amount to be determined by the Court. Respondents consented
to the entry of said Order of Permanent Injunction and Other
Relief without admitting or denying the allegations in the
Commission's Complaint. Securities and Exchange Commission v.
Southern California Securities, Inc., et al., Civil Action No.
94-6156 HLH (GHKx) (C.D. Cal.).
B. The Commission's Complaint in the civil action
referenced in subparagraph III.A., above, alleged that from about
January 1993 through August 1994, the Respondents, through
Southern California Securities, Inc. ("SCSI"), a broker-dealer
formerly registered with the Commission (File No. 8-42575),
raised over $4.07 million from about 196 investors through a
scheme involving the fraudulent offer and sale of unregistered
limited partnership interests in five oil and gas limited
partnerships named Sunrise Energy Partnerships Ltd. VII-XI
("Partnerships" or "Sunrise VII-XI") managed by Buckeye
Development Co. dba Western Reserve Development Co. ("Western")
and operated by Grizzly Operating Co. dba Cherokee Operating Co.
("Cherokee"). Respondents jointly owned Western and Cherokee
during the same time period. As alleged in the Complaint, in the
offer and sale of these Partnerships' securities, Respondents
made misstatements and omissions to investors and prospective
investors. The Complaint alleged more specifically:
1. In promoting the investments, Respondents
represented that investor funds would be used for oil and gas-
related expenses, lease acquisition costs, sales commissions,
Western's fees, working capital and investing in "U.S. Government
obligations." In fact, Respondents misused and misappropriated
$1,415,900, or 41.5%, of the $3,410,000 raised from Sunrise VII-X
investors to pay the overhead and operating expenses of SCSI and
Cherokee and to pay themselves. Respondents also misused and
2/ The findings herein are made pursuant to Respondents' Offers
and are not binding on any other person or entity named as a
respondent in this or any other proceeding.
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misappropriated $108,590 of the funds raised from Sunrise IX and
XI to pay the overhead and operating expenses of SCSI and
Cherokee. Respondents also misused and misappropriated at least
$164,300 of Sunrise IX and XI investor proceeds to pay
themselves.
2. The Sunrise VII-X offering documents represented
that Cherokee, as Partnership Operator, would acquire rights to
oil and gas properties for the Partnerships. Even though
Cherokee and Respondents purportedly acquired the interests in
oil and gas properties in Cherokee's name, Respondents failed to
transfer oil and gas properties to the Partnerships.
3. Respondents represented both in the Sunrise VII-X
offering documents and orally to investors that investors'
principal would be backed by "U.S. Government Obligations."
Respondents, however, failed to invest any portion of Sunrise
VII-X investor proceeds in U.S. government obligations.
4. SCSI's sales agents and Gross orally represented
to prospective investors that the projected income of the
Partnership interests was 12% per year. Respondents, however,
undisclosed to investors, supplemented distributions to investors
with "advances" from various sources to pay investors the
represented 12%.
IV.
Based upon the foregoing, the Commission deems it
appropriate and in the public interest to impose the sanctions
specified by the Respondents in their Offers.
Accordingly, IT IS HEREBY ORDERED, effective immediately,
that Gross and Hammonds be barred from association with any
broker, dealer, investment company, investment advisor or
municipal securities dealer.
For the Commission, by its Secretary, pursuant to delegated
authority.
Jonathan G. Katz
Secretary